What is a Hardship Discharge?

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What is a Hardship Discharge?

If an individual debtor in a Chapter 13 case is not able to maintain plan payments to the applicable case trustee, it is possible to file a motion for a “hardship” discharge so that the case can be completed. As a practical matter, the relief obtained by the debtor is quite similar to that obtained by converting the case to one under Chapter 7 in that the debts which are not dischargeable in Chapter 7 are not discharged if the Court approves a hardship discharge in the Chapter 13 case. For an individual 13 debtor to obtain a hardship discharge, such debtor must show that (1) the amount paid to creditors pursuant to the confirmed Chapter 11, 12, or 13 Plan is at least as much as the creditors would have received had the estate been liquidated as of the effective date of the Plan, and (2) modification of the Plan is just not practicable. In addition, in a Chapter 13 case, the debtor must show that the failure to complete plan payments is due to circumstances for which the debtor should not justly be held accountable.

2008-12-22T09:55:32+00:00
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